The company's financial sheet looks very troubled. Its stock is currently is only worth $7.7B USD (market capitalization). Yet Sprint says it must somehow obtain $7B USD in new financing over the next few years in order to pay off its expensive iPhone contract and complete network upgrades. If it can't get that financing, it will likely go into bankruptcy and that could be the end of the network.

Sprint has commited a massive $15.5B USD over the next four years to Apple, Inc. (AAPL), in order to get the popular iPhone on its network. It's easy to see why Sprint would want the iPhone so badly -- the iPhone remains the best-selling single handset in the U.S. and in the world. However, in signing away a massive amount of money to Apple, Sprint may have signed its own death warrant.

Industry analysts say Sprint was crazy to give Apple so much cash, potentially a fatal error. Bernstein analyst Craig Moffett offers, "To meet their target, they'd effectively have to turn their entire company into an Apple shop."

Sprint would have to turn into an iPhone store to make its huge gamble pay off, say analysts [Source: TechBuffalo]

II. Network Upgrade Also Hits Sprint Hard

Adding to the company's financial woes, its shortfall comes at a time when the industry is looking to make the transition to 4G. Sprint was first to the 4G game, but the technology it picked -- WiMAX -- has been cast aside almost unilaterally, globally, in favor of LTE. As a result, Sprint has been forced to shift gears and prepare itself for a costly LTE deployment, essentially losing all its hard WiMAX work. Between that LTE deployment and financing for improved 3G coverage, Sprint expects to pay $7B USD.

This double trouble for America's third largest carrier greatly raises the risk level, according to analysts. Michael Nelson, an analyst with Mizuho, comments, "They're betting the house on two things at the same time. If they pull it off, great. If they don't, their financial performance would get materially worse, and they could have significant liquidity risks."

Sprint is also being hit hard with network upgrade costs as it tries to transition to LTE 4G [Source: Sun Journal]

Sprint says in the best case it may generate a $100M USD free cash flow for 2011 (worst case it would have a negative cash flow of $200M USD), and that it would have a positive cash flow for 2012. However, those numbers don't tell the full picture as they don't include the interest payments on the big loans Sprint hopes to draw from vendor financiers. With interest factored in, Sprint will likely be continuing to post big losses.

The network added 1.3 million subscribers in Q3 2011, but lost just a bit more than that, yielding a net decline of 44,000 customers. Sprint may face more defections as it cuts its unlimited data plans and begins slapping customers with fines. Sprint's tethering plans are currently the most expensive in the industry, while its 4G coverage is worse than its rivals.

III. Sprint's 4G Service Provider is in Trouble as Well

Sprint is also in the process of negotiating its contract with ClearWire Corp. (CLWR), who provides its WiMAX service. The move is broadly seen as a good thing for Clearwire, as investors had previously feared that Sprint might bail on its partner.

The pair have an interesting relationship; Sprint is a majority owner of ClearWire. ClearWire paid Sprint to build its 4G network. Then Sprint and other carriers paid Clearwire to use that network.

However, investors have grown concerned recently that bankruptcy risk from ClearWire could lead to Sprint bailing on the relationship. ClearWire, like Sprint is looking to take on debt. The company -- which has a market cap. of $1.85B USD -- needs $900M USD in financing.

Ultimately it's far from game over for Sprint and ClearWire. But both companies seem to be digging deep into the money hole and look to be headed to big losses, when you factor in interest.

Sprint, in particular, made a huge gamble with the iPhone -- at a time when the iPhone seemed to be waning in popularity versus Google Inc.'s (GOOG) Android juggernaut. Sprint CEO Dan Hesse promises the deal will pay off. But Sprint admits it won't see profit from the deal until at least 2015 and that it doesn't know how many iPhones in it will sell. Sprint better hope that number turns out to be "a lot."

I have an android phone, on Metro, & currently own nothing by Apple, but someone explain to me if Apple makes the Iphone, why Sprint would have to borrow money for the platform? Is this how Apple makes it's money by these types of deals?

I was rooting for Sprint after this whole AT&T/T-Mobile merger fiasco but now, after all the blunders management keeps making--and they keep piling up, I'm now not so sure about them anymore... Magic eight ball says "future looks cloudy" for Sprint.

The only winner here is Apple. Well, as long as they can get Sprint to cough up the dough.

This is another obscured article by daily tech that doesn't get the facts right. They lost 45,000 customers to churn not over a million!! They had over a million "net" adds... Seriously dailytech? Also, I highly doubt they will go bankrupt and that will be the end of them.

They are making huge, yes, but very necessary risks. If they didn't get the phone now and launch 4g Lte or network vision, they would be significantly out performed by the other carriers. What's not mentioned here is how well off Sprint will be and a good position it will beown 5 years to adapt to new technology with network vision or the fact that they will most likely have the most affordable Lte advanced nationwide network yet. Also, they would have not bought that many iPhones unless they they could sell them. Not only that, it will bring higher customer satisfaction and retention as they continue to grow and add subs. Plus, the iPhone is recognized worldwide as being a very tofu table device for carriers, we already saw this when sprint broke sales records by mid day on launch.

I honestly think Sprint is finally making the right choices that will set them up to be extremely competitive in the future and I think these risks will be beneficial. It's just a bad economic climate right now and these are made to look like a bigger deal by the media then they really are.

What I understand is all of a sudden Sprint is being brought forth to a negative light on this particular website. In order to have an effective article showing negative points, there needs to be more clarity by showing what can happen if thing's go wrong and what can happen if they go right, so in other words, the risks need to be weighed properly. This is a purely negative article, when really, it's not really going to have that much of a negative impact on Sprint.

They are making huge risks, but they are absolutely necessary. Inaction for Sprint is worse then action at this point. If they really do have 277 million people covered by the end of 2013 with LTE-Advanced, that will be extremely competitive with Verizon, who themselves should have about the same amount of coverage and Sprint will likely offer it for a cheaper price. This is also 2 years ahead of AT&T's planned nationwide coverage. At this point, Sprint will have a massive amount of coverage and will offer a very competitive product, positioning themselves as one of the beter carriers. That, coupled with their customer service improvements will be huge and could offer significant gains for the company. They also have very large partnerships being created with Lightsquared and Clearwire that will ensure multiple different products for good prices. WE NEED THIS. If it doesn't happen, we will have a massive duopoly and everyone will lose. Sprint can't fail or we are going to be screwed. Root for them, even if yo don't own one of their devices, because it's healthier to have good competition like this.

They are already 2 years ahead of schedule on their new network, see below.

Ballzy is right. Sprint has been bleeding marketshare for the better part of the last decade. Kudos to Sprint for making a gamble like this. How else are they going to compete with Verizon and AT&T? Most companies just continue with the status quo.

They have a pretty good Android lineup already. Adding the iPhone was the obvious next step. Though I question how much money they're actually investing in this.

Wouldn't it be ironic if they were to suddenly face bankruptcy, only to be bought out by Apple....who might then decide they don't need AT&T and Verizon any more, they'll simply convince all the iLemmings to switch over to the new Apple Phone Co (formerly Sprint)??

Someone said that Apple is a smart company. (They also said Sprint was a smart company, but I can attribute that to lack of knowledge of the industry/experience with Sprint) Sprint's network is so pathetic that it would not be a good buy. Apple wants to be ubiquitous (and at the same time slightly difficult to attain... you know, to keep up the brand prestige that faux exclusivity brings) and Sprint's network is very very small.

Sprint's network would only be valuable to an existing carrier to augment their current network, but going with WiMax instead of LTE would mean the new owner would have to eat the upgrade costs. Also, Sprint's network is an amalgam of their original CDMA towers and Nextel's iDEN's towers. This means Verizon could only use some of the network to augment theirs unless they wanted the Nextel white elephant. GSM carriers like AT&T and T-Mobile wouldn't have any use at all for it, and most other CDMA carriers don't have the capital to cover their debt, buy the company and make it profitable.

TL;DR version - Sprint lost $3,000,000,000+ last year. Apple DOES NOT WANT!

Sprints network is not small. Last I saw they had more towers than Verizon. The problem with sprint and a reason Apple would hate them is that their towers are divided amount many different protocols. Still running some iDEN I think and then CDMA, WiMAX and now adding LTE. Sprint needed to not buy the iPhone they need instead to gamble more on something else like killing all the iDEN towers right now and migrating them to LTE in a hop fashion. Personally I also think they should have bet big on windows phone rather than the iPhone I would not think it would be a wise idea for sprint to take on this load they were adding subscribers and turning their market around without the iPhone. It is not part of the overall plan just a distraction.

Well, the iPhone deal is mostly b/w Apple and Sprint. If Sprint couldn't sell that many of iPhone, I don't think Apple would chase it down and demand they bought the required number of phones to fulfill the contract -- that would be Apple's admission of the iPhone doesn't sell well. They probably could find a legal settlement and Sprint can get out of the contractual agreement by paying a lesser amount.

I don't know where you get the "1 in 10" number. I've seen stats that put smartphones at 50% of cell phone sales, and I think that's low. I work in this business, and we sell more smartphones than feature phones by a dramatic margin.

Yeah, that's it. Has nothing to do with wasting billions on a network technology that Intel dumped and the rest of the world was never going to adapt save for some obscure places, only to switch to LTE.

All they have to do is promise to put a small wind turbine or a couple solar panels on each tower. Then, your government will toss them $7b with no strings attached.SprinT needs to hire a couple competent lobbyists.

Solyndra may have been called a loan, but if the people giving them that loan knew they were on the verge of bankruptcy (all indications are that they did)then it was, in essence, a grant (i.e. money that doesn't need to be paid back).

I know that's a little bit of a stretch in the conspiracy direction, but this administration's actions nurture such feelings quite often.

Sprint and Apple are SMART companies. Did either of them actually expect that type of cash-flow from Sprint? I don't think so. How long ago did they sign the contract? A month or two? And now they're already saying "Derp, actually, this is too much too handle."

Was Sprint going into this contract expecting to get bailed out?Apple - "My mind on my money and my money on my mind."Thanks for thinking about anything but money. Again.

...An Apple iDevice only network, controlled by Cupertino. You can roam with whoever you want, as long as it is an Apple approved network... You can browse any site that is approved by Apple... The possibilities for extending the iWalled Garden become positively magical!

All the posts so far seem to be missing the revenue side of the equation. The iPhone gives Sprint revenue that just barely matches their costs. So it is a wash from that perspective. On the other hand, the iPhone gives Sprint higher margins and drives ARPU higher due to the need for more data services.

DailyTech should do a better job of presenting both sides of the story and pay better attention to facts. Did you guys miss the analyst call yesterday that laid all this out?

do any of you think that the reason they paid such a hefty fee is because they may launch their 4g lte network with an iphone 5 exclusive? That may correlate to why they may not see profits until 2015... by the time it launches it will be mid to late 2012...2 year contracts washed out by exclusive/network building/the rest of their handset subsidies...youre at end of 2014.